TaxTMI 
TaxTMI 
2007 (12) TMI 206
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....isposed of by this common judgment. 2. The concerned second respondent-assessee of the cases made application under section 245C of the Income-tax Act, 1961 (hereinafter referred to as "the I. T. Act"), in the prescribed form making disclosure of their respective income, stated to be true and had not been disclosed before the Assessing Officer. On receipt of such applications, the Settlement Commission called for reports in each case from the Commissioner of Income-tax and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case, while observed that there is complexity of investigation involved therein, allowed the applications to be proceeded with in accordance with section 245D of the Income-tax Act. 3. Such orders under section 245D passed by the Settlement Commission in the respective cases have been challenged by the Revenue, mainly on the ground that the applications preferred by the assessee did not fulfil the requirements of section 245C and there being gross non-application of mind by the Settlement Commission on the issue, the impugned orders to proceed under section 245D is bad. 4. Mr. G. E. Vahanvati, ....
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....which had not been disclosed before the assessing authority, as such amount had already been noticed by the assessing authority while making earlier assessment. It was also submitted that the assessee had not disclosed the manner in which such income has been derived, the additional amount of income-tax payable on such income and other particulars is required for such disclosure. A vague statement alleged to have been made, such as "in the course of business". 8. Learned Solicitor General submitted that the supplementary statement in annexures II, III and III-A were filed for treating the same as part of the original application, wherein further sum of Rs. 49,01,738 has been added as an amount disallowed in respect of relief under section 80HHC and, thus, vide revised annexure III, the amount of income, which is alleged to have not been disclosed was enhanced from Rs. 1, 72,92,886 to Rs. 2,21,94,624. According to him, another additional application was filed on February 7, 2005, which suggests that the amount as was originally disclosed in the application under section 245C was not a full and true disclosure of the income of the assessee and, thus, the application should have be....
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....d in the second disclosure it was giving up the deduction claimed under section 80HHC and as such it cannot be said that the first disclosure was not full and true. Both the claims arise in the same assessment order due to the same proceeding, i.e., there was only one appeal pending before the Commissioner of Income-tax (Appeals), at which stage of the case the second respondent chose to file the settlement application. The claim that certain amounts were loans and not liable to be included in the income, and the claim of deduction of export profits were both part of the same appeal. As such there can be only one disclosure and one application for settlement, which should be full and true. If variations are made and further amounts added to the amount offered for settlement, regardless of the reasons or the basis for the same, it would mean that the first application is certainly not full and even what is stated in it is not true. (e) In the annexures filed, the manner in which income was earned is stated as "business income". But from a plain reading of annexure II that it only sets out how there is complexity of investigation. There is no detail given as to how income now offe....
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....nation of the creditors and as such the issue of determination of genuineness of the credits in the case involves certain complexity of investigation. 12. According to Mr. Arun Jaitley, learned senior counsel, there were statements recorded behind the back of the assessee. The Settlement Commission has given a specific conclusion that it is prima facie satisfied about the disclosure of income being full and true and, thus, the Commission has returned a tenable satisfaction on the jurisdictional facts/issues for further consideration. 13. So far as the argument on income not being undisclosed income is concerned, according to learned senior counsel for the second respondent assessee, it is an afterthought and baseless. The income that form the subject-matter of applications are additions made by the Assessing Officer to the income of the answering respondent. These additions were not income disclosed by the assessee. While it was the case of the second respondent that they were loan transactions, the Assessing Officer erroneously held them to be unexplained/undisclosed income and added the same to the income of the assessee. Thus, the consideration of transactions in the cours....
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....on in January, 2005, and February, 2005, is untenable. Incidentally, supplementary statement dated January 19, 2005, was not preferred to or annexed with the writ petition. The said statement is in respect of disallowance of relief under section 80HHC of the Act. Importantly, the income under this head had been squarely referred to in the application originally filed and had been objected by the Revenue in its objection dated February 9, 2005. However, since the amounts under this head had not been offered for additional tax while filing the application originally, and that it was advised that it could be included in the application, the supplementary statement was submitted. Thus, it was in respect of another head of income, which was in dispute on a technical score and was pending appeal. The second respondent considered it appropriate to avoid protracted proceeding in the usual channels. (c) At any rate, such inclusion cannot strike at the validity of application as originally filed. Indeed a separate application could have been filed subsequently under the same head, in view of the fact that the application could be made at any stage of a "case", this expression being a defi....
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.... Section 245C provides for filing of an application by an assessee for settlement of his case. Sub-section (1) says that an assessee may 'at any stage of a case relating to him' make an application in the prescribed form and manner, 'containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed' to settle his case. There are certain other requirements which he must fulfil before making such an application but which it is not necessary to notice here. 11. For a proper delineation of the jurisdiction of the Commission, it is necessary to bear in mind the language of sub-section (1) of section 245C. It provides that at any stage of a case relating to him, an assessee may make an application to the Commission disclosing fully and truly income which has not been disclosed before the Assessing Officer. He must also disclose how the said income has been derived by him besides certain other particulars. This means that an assessee cannot approach the Commission for settlement of his c....
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.... to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessment/appeal, etc. Section 245C is meant for those assessees who seek to disclose income not disclosed before the Officer including 'the manner in which such income has been derived'. If the Department already knows and has gathered particulars of such income and the manner in which it has been derived, there is no 'disclosure' by the assessee Let it be remembered that the words in question (in section 245D(1A)) are not words of limitation nor are they meant to help unscrupulous assessees. Chapter XTX-A is a part of the Income-tax Act and must be construed consistent with the overall scheme and object. The Chapter is meant for those assessees who want to disclose income not disclosed till then together with the manner in which the said income is derived. It is not meant for those who come after the event, i.e., after the discovery of the particulars of income and its source-or discovery of particulars of fraud perpetrated by the assessee, as the case may be- nor even to those who come to the Commission to forestall the investigation/inquiries which have reached ....
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....is to see that protracted proceedings before the authorities or in courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act......... 16. The foundation for settlement is an application which the assessee can file at any stage of a case relating to him in such form and in such manner as is prescribed. The statutory mandate is that the application shall contain 'full and true disclosure' of the income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived. The fundamental requirement of the application under section 245C is that full and true disclosure of the income has to be made, along with the manner in which such income was derived. On receipt of the application, the Commission calls for report from the Commissioner and on the basis of the material contained in the report and having regard to the nature and circumstances of the case or complexity of the investigation involved therein, it can either reject the application or allow the application to be proceeded with as provided in section 245D(1). 17. It has to be noted th....
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.... of Income-tax (Appeals). It has been accepted by the second respondent-assessee that a sum of Rs.1,72,00,000 for which claim has been made were not the income disclosed by the assessee, but it has not been disputed on behalf of the assessee that the sum of Rs.1,72,00,000 was shown by the assessee as loans from creditors, but it was not accepted by the Assessing Officer, who included the aforesaid amount to the income of the second respondent-assessee. Apart from a plain reading of section 245C, from the judgments of the Supreme Court, as referred to above, it will be evident that the disclosure under the said section 245C must be of an income not disclosed before the Assessing Officer. 21. In the case of Express Newspapers Ltd. [1994] 206 ITR 443, the Supreme Court observed that if the Assessing Officer or the income-tax authority had already discovered it or has either gathered materials to establish the particulars of such income, in such a case it cannot be said that the is acting voluntarily or in good faith. Such assessee should not be allowed to take advantage of the comparatively easy course of settlement. He must be allowed to face the normal channels of assessmen....